The paper by Guillermo A. Calvo explores the mechanisms through which a sudden stop in international credit flows can lead to financial and balance of payments crises. Despite the current account deficit being fully financed by foreign direct investment, equity and long-term bond financing can protect an economy from such crises. The author examines factors that might trigger sudden stops and argues that countries have greater independence compared to regions within a country, which could explain why sudden stop crises are more prevalent and destructive at the international level. The paper begins by discussing the confusion surrounding the causes of financial crises, particularly in emerging markets. It highlights the contrasting experiences of Mexico and Asia, where high saving rates and low current account deficits did not prevent crises. The author emphasizes the need to revisit basic economic principles to understand the mechanics of sudden stops and their impact on the economy. In a non-monetary economy, a sudden slowdown in capital inflows can lead to a sharp contraction in the current account deficit, causing a real devaluation and financial turmoil. The damage is more pronounced when consumption makes up a large share of total expenditure, as it leads to a larger cut in the demand for nontradable goods. The maturity structure of debt is also important; shorter residual maturity structures are more susceptible to sudden stops. The paper then discusses the role of self-fulfilling prophecies in sudden stops. A slowdown in capital inflows can push the economy into insolvency or lower the productivity of physical capital due to bankruptcy battles and changes in relative prices. Bankruptcies can destroy specific human capital and disrupt credit channels, leading to a self-fulfilling output collapse. Pro-cyclical policies, such as tight fiscal and monetary policies, can exacerbate this process. In a monetary economy, a slowdown in capital inflows can be cushioned by a loss of international reserves, but this is often illusory. The central bank's ability to release reserves is limited, and tight policies can trigger speculative attacks, further exacerbating the crisis. Sticky prices and wages introduce Keynesian channels that can deepen the depression, but devaluation is not a panacea, especially if debt is denominated in foreign currency. The paper concludes by discussing the international nature of these crises. Countries, unlike regions, have more sovereignty and are less constrained in choosing fiscal and monetary policies. This makes countries more vulnerable to sudden stops and leads to deeper and longer-lasting financial crises compared to regions. Equity financing and long-term loans are suggested as ways to shield economies from sudden stop crises.The paper by Guillermo A. Calvo explores the mechanisms through which a sudden stop in international credit flows can lead to financial and balance of payments crises. Despite the current account deficit being fully financed by foreign direct investment, equity and long-term bond financing can protect an economy from such crises. The author examines factors that might trigger sudden stops and argues that countries have greater independence compared to regions within a country, which could explain why sudden stop crises are more prevalent and destructive at the international level. The paper begins by discussing the confusion surrounding the causes of financial crises, particularly in emerging markets. It highlights the contrasting experiences of Mexico and Asia, where high saving rates and low current account deficits did not prevent crises. The author emphasizes the need to revisit basic economic principles to understand the mechanics of sudden stops and their impact on the economy. In a non-monetary economy, a sudden slowdown in capital inflows can lead to a sharp contraction in the current account deficit, causing a real devaluation and financial turmoil. The damage is more pronounced when consumption makes up a large share of total expenditure, as it leads to a larger cut in the demand for nontradable goods. The maturity structure of debt is also important; shorter residual maturity structures are more susceptible to sudden stops. The paper then discusses the role of self-fulfilling prophecies in sudden stops. A slowdown in capital inflows can push the economy into insolvency or lower the productivity of physical capital due to bankruptcy battles and changes in relative prices. Bankruptcies can destroy specific human capital and disrupt credit channels, leading to a self-fulfilling output collapse. Pro-cyclical policies, such as tight fiscal and monetary policies, can exacerbate this process. In a monetary economy, a slowdown in capital inflows can be cushioned by a loss of international reserves, but this is often illusory. The central bank's ability to release reserves is limited, and tight policies can trigger speculative attacks, further exacerbating the crisis. Sticky prices and wages introduce Keynesian channels that can deepen the depression, but devaluation is not a panacea, especially if debt is denominated in foreign currency. The paper concludes by discussing the international nature of these crises. Countries, unlike regions, have more sovereignty and are less constrained in choosing fiscal and monetary policies. This makes countries more vulnerable to sudden stops and leads to deeper and longer-lasting financial crises compared to regions. Equity financing and long-term loans are suggested as ways to shield economies from sudden stop crises.